Sunday, September 8, 2013

How RFID has changed the landscape of SCM?

The supply chain management has been focusing on squeezing cost and improving operations for decades. In the 1980s, there was a lot of focus on just-in-time production, lean manufacturing and discrete systems. In the recent decade, the obsession about high quality goods, cost minimization and flawless distribution has been made possible by the advancement in technology. 
Radio Frequency Identification (RFID) technology, as a part of a broader spectrum of sensor-based technologies, has dramatically revolutionized the supply chain management. Basically RFID is simply an enabling technology that has the potential of helping retailers provide the right product at the right place at the right time, thus maximizing sales and profits. RFID provides the technology to identify uniquely each container, pallet, case and item being manufactured, shipped and sold, thus providing the building blocks for increased visibility throughout the supply chain. 
RFID is a system of small electronic tags (comprising a tiny chip plus an antenna) that transmit data via a radio signal to RFID readers and related hardware and software infrastructure. The information on tags is read when they pass by an RFID reader, and that movement is captured and managed by the infrastructure. The direct and swift interaction between the tags attached to goods and the information reception center has greatly reduced the fatigue of manually tracking goods along the supply chain. This technology has been widely applied to various industries including retailers, distributors, logistics service and pharmaceutical companies etc. Professor Phillip J. Windley at Brigham Young University estimated that US retail giant Walmart alone could save $8.35 billion annually with RFID - that's more than the total revenue of half the companies in the Fortune 500! 
Thousands of inbound and outbound shipments can be identified by RFID labels which enables 100% inventory visibility and unattended sortation of goods at different points of the supply chain. The following image visualizes the way RFID works in the products manufacturing period.
Source: Zebra Technologies
On top of the theories and cases on the textbooks, I've personally experienced the power of RFID when I shopped at one of Zara's retail stores in Spain. The blue dress in my size was sold out in the store, so I asked the salesperson to check their inventories in the warehouse. I thought it would take at least 15 minutes for them to figure it out, but the item was accurately located by the system in less than 5 minutes. More surprisingly, the salesperson helped me place an order right away and delivered the dress to my door very next day. When I felt puzzled about the high efficiency, I searched online and found the secret behind Zara's amazing customer service - RFID. One of RFID’s most attractive offerings is its fundamental attribute of not requiring line-of-sight when reading RFID tags. This means items do not require particular orientation for scanning, unlike barcodes. 
Obviously RFID has many other advantages such as labor reduction, cost cutting and durability, but it's also faced with many pressing issues such as lack of standards and potential privacy loopholes. In the long run, technologies including RFID will continuously drive and maximize supply chain management, but key issues need to be addressed to bring the supply chain management to a higher level of success. 

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